India Banks and Cryptocurrency

India, Banks and Cryptocurrency

Recently, there’s been many actions being taken on crypto by India. Indian state police issued warning against the use of cryptocurrency, Indian central bank’s report shows cryptocurrencies are not currently a threat and still Indian banks requiring customers to sign a contract not to use cryptocurrencies.

State Police Warning

A circular was issued on the 2nd January 2019 by the police of Jammu & Kashmir which states:

The general public is informed not to make any type of investment in cryptocurrencies, virtual currencies (vcs) such as Bitcoin because there is a real and heightened risk associated with them. This can result in a sudden and prolonged crash, exposing investors; especially retail consumers who stand to lose their hard-earned money.”

The circular says the obvious part of crypto that it is volatile. And due to that fact, this may result in a loss of money.

Central bank report says no threat

RBI on 28th December 2019 published its “Report on Trend and Progress of Banking in India 2017-18”. The report cites an analysis by the FSB (Financial Stability Board), an international body which monitors and makes recommendations about the global financial system.

India’s central bank wrote in its report:

The FSB has undertaken a review of the financial stability risks posed by the rapid growth of crypto-assets. Its initial assessment is that crypto-assets do not pose risks to global financial stability currently.

The RBI continued to describe in its latest report:

The market continues to evolve rapidly, however, and this initial assessment could change if crypto-assets were to become more widely used or interconnected with the core of the regulated financial system … Cryptocurrencies need constant monitoring on overall financial stability considerations, given the rapid expansion in their usage.

The legal framework in India for cryptocurrencies remains unclear since April, as RBI stopped all banks from dealing with cryptocurrencies. The prohibition came into effect in June, while the Supreme Court’s hearings on the case, initiated by local crypto firms, were repeatedly postponed.

Banks trying to force customers against crypto

New reports are alleging that some banks are now requiring customers to sign contracts promising not to use cryptocurrencies. Some of the banks include Kotak Mahindra and DigiBank.

Kotak Mahindra went one step forward and started to display warnings on its ATM screens:

”Virtual currencies (VCs) are not legal tender and do not have any regulatory permission or protection in India. We request you not to make transactions involving any VCs from any of your account/s. For any such transactions, the bank shall be acting in accordance with the regulatory guidelines which include closing your account without further intimation.”

Now, even neighbouring countries are trying to follow, like Pakistani Faysal Bank, also began cautioning customers of using cryptocurrencies.

RBI has not banned cryptocurrency, instead has only restricted the banks from indulging with any cryptocurrency business.

What do you think? Will the Indian Government allow the use of cryptocurrency after a while? Or will India ban usage of crypto? Share your thoughts in the comment.

Published by Shebin John

An engineer by Profession, Marketer by Choice and Investor by Passion. Computer Science Engineer who loves to spend time learning new things, technologies, and frameworks.